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(S. 365) Final passage of legislation that would raise the U.S. debt limit by $2.4 trillion (to $16.7 trillion) through 2012, cut more than $900 billion from social programs and military spending, and create a commission to propose an additional $1.5 trillion in budgetary savings (either from spending cuts or tax revenue increases)

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(S. 365) Final passage of legislation that would raise the U.S. debt limit by $2.4 trillion (to $16.7 trillion) through 2012, cut more than $900 billion from social programs and military spending, and create a commission to propose an additional $1.5 trillion in budgetary savings (either from spending cuts or tax revenue increases)

This was a vote on final passage of legislation that would that would raise the U.S. debt limit (the maximum amount the United States can be in debt) by $2.4 trillion through 2012, cut more than $900 billion from social programs and military spending, and create a commission to propose an additional $1.5 trillion in budgetary savings (either from spending cuts or tax revenue increases).

The debt bill was the result of negotiations between President Obama, Senate Majority Leader Harry Reid (D-NV), and Speaker John Boehner (R-OH). In previous years, Congress had voted to increase the debt limit with little controversy or fanfare, regardless of which party controlled the House, Senate, or the White House. This year—in 2011—House Republicans, who held a majority in that chamber, refused to raise the debt limit unless Democrats agreed to deep spending cuts. While most economists argued that defaulting on the nation’s debt could bring about an economic catastrophe, Republicans effectively held the debt limit hostage until Obama and Congressional Democrats agreed to make major concessions with respect to spending cuts.

The bill would cut more than $900 billion from discretionary spending (spending other than funds for Medicare, Medicaid, and Social Security). The bill did not, however, specify which programs would be cut. Rather, the measure simply limited discretionary spending overall. Thus, decisions regarding cuts to specific programs would be made by Congress and President Obama over the next few years. The bill did not cut funding from Pell Grants (which provide financial aid to low-income college students), as Republicans had previously insisted on. In order to preserve funding for Pell Grants, Democrats agreed to eliminate subsidized student loans for graduate students. (Under subsidized loans, students pay no interest on the borrowed amount during the period which they attended school. In other words, no interest accrues on the loan while the student is enrolled.) The measure preserved subsidized loans, however, for undergraduate students.

Finally, the measure also created a bi-partisan commission to propose an additional $1.5 trillion in budgetary savings—either from further spending cuts, tax revenue increases, or a combination. If the commission cannot agree on a proposal--or if Congress rejects the proposal--across-the-board spending cuts (to domestic programs as well as military spending) totaling $1.2 trillion would automatically be enacted.

Rep. David Dreier (R-CA) urged support for this bill: “Creating jobs, Democrats and Republicans alike talk about that. How is it that we're going to be able to do that? Getting our fiscal house in order is a very, very important step in our quest to ensure that the people who are hurting and looking for jobs will have an opportunity to get them. We are sending a positive signal to the global market that we are the world's economic, military and geopolitical leader. By increasing the debt ceiling, we are sending a positive signal that we are going to continue meeting our obligations and our responsibility but, at the same time, dramatically reducing spending….After 75 times of increasing the debt ceiling, we are finally getting to the root cause. The problem, as has been said over and over again, is our debt, and we're going to turn the corner on that in a thoughtful and balanced way.”

House Majority Leader Steny Hoyer (D-MD) also supported the bill: “Ladies and gentlemen, I have said numerous times during the course of this debate about whether America was going to pay its bills and that we need to vote, not as Republicans or Democrats, but as Americans: Americans concerned about the fiscal posture of their country, concerned about the confidence that people around the world have in the American dollar, which is, after all, the standard of the world. That is what I think this vote is about. It should not be about partisan politics, and very frankly, it should not be about ideological extremes. It ought to be about responsibility. It ought to be about understanding that our oath of office is to preserve and protect the United States of America. This bill does that. Vote `yes.'

Rep. David Price (D-NC) opposed the bill: “…We should never have reached this point. Under Democratic and Republican presidents alike, Congress has always fulfilled its responsibility to pay our nation's bills when they come due. We have disagreed vehemently about matters of fiscal policy, but we have always recognized that the full faith and credit of the United States should remain above the partisan fray. Until now, that is….For the last several weeks, Republicans have held our nation's economy hostage to their narrow and extreme ideological agenda, demanding a ransom of devastating cuts to critical domestic programs while protecting tax breaks for oil companies and other special interests….apparently, economic calamity is a small price to pay for ideological purity….That the House and Senate are just now considering legislation to stave off default is a tremendous failure by House Republicans, who could not bring the most extreme elements of their caucus to a more balanced legislative solution. The result is an agreement which could have been worse but is still not good enough. From the beginning, I have said that any serious approach to deficit reduction must do two things: protect the fragile recovery, because the best cure for a budget deficit is a growing economy, and take a balanced approach to finding savings by putting all types of spending and revenues on the table. This agreement meets neither of these tests.”

The House passed this bill by a vote of 269-161. Voting “yea” were 174 Republicans and 95 Democrats. 95 Democrats—including a majority of progressives—and 66 Republicans voted “nay.” As a result, the House passed legislation that would that would raise the U.S. debt limit by $2.4 trillion through 2012, cut more than $900 billion from social programs and military spending, and create a commission to propose an additional $1.5 trillion in budgetary savings. Following House passage, the Senate also passed the measure, and President Obama signed it into law.